June 13, 2012– EUROPE– Here’s how the Eurozone crisis might come to a head over the summer: a “Spanic,” followed by a “Quitaly,” followed by a “Fixit.” A fresh panic in Spain might be followed by rising demands for Italy to quit if it doesn’t get the same terms its fellow Mediterranean country has been offered, followed by a Finnish departure from the euro that might finally bring the whole saga to a climax. It would be a rough ride — and you wouldn’t want to be holding many assets other than dollars or gold or possibly Swiss francs while it was playing itself out. But at least it might bring a resolution to the crisis. Almost a quarter of the euro’s 17 members have now needed outside help, and Cyprus will probably join the list soon. It is hardly a great record for a monetary experiment, which, let us remember, was meant to bring greater stability — not less. So how could this play out over the summer. Here’s how the sequence might work: First, the Spanic (for a panic in Spain). We’ve just seen one rescue package for the troubled Spanish banks. But who says 100 billion euros is enough? This is a country that is sliding into deep recession, and where the government is cutting spending fast — which is only going to deepen the recession. The economy is forecast to contract by 1.7% this year, and the actual outcome could be much worse. During a recession, businesses go broke, unemployment rises, and loans don’t get repaid because people don’t have any money. None of that is good for the banking system. Imagine how that is going to feel to the Italians. The Spanish get to borrow money at half what it costs them — and this at a time when very high borrowing cost are pushing your country into the fifth recession since the nation joined the single currency. Worse, Italy has to stump up around 22% of the Spanish rescue — borrowing money at 6% to give to its neighbors at 3%. That isn’t going to go down well. Finally a Fixit (for a Finnish exit). The crisis will finally come to a head when one country decides to get out. Finland is the most likely. Why? Because it is a small nation with a strong economy. It is easy to head for the door. Finland would be better off on the first day, just as Estonia was when it decided to leave the ill-fated ruble zone created after the collapse of the old Soviet Union. It doesn’t particularly have to worry about the impact on the European Union, in the way that Germany would if it opted out. If a country such as that leaves, it is effectively game over, but no one can really say that of a tiny place such as Finland. And it has a strong anti-euro political grouping; the True Finns scored well in the last election and may well improve their position in the polls. Finland is already demanding collateral for its portion of the Spanish loan. That could well turn into a deal-breaker — no collateral, so we’re out of here. Once one country leaves, it is much easier for the next to leave, in much the same way as it is easier to be the second person to leave a really bad party than the first. –Market Watch

European Banks will be wiped out: Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first indepth analyses of what might happen if the eurozone disintegrates. The analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the “peripheral” countries – Greece, Ireland, Italy, Portugal and Spain – from the eurozone. Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns his represents as much as 10% of the credit in the financial system. “We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said. The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts – a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically – happen at once. The UK’s banks will not escape unscathed, although they are better insulated than those in the eurozone. In the event that the peripheral countries leave the eurozone, Barclays faces losses of €37bn and bailed out Royal Bank of Scotland some €26bn. If only Greece were to leave the single currency, the Credit Suisse analysts calculate that losses for Europe’s banks would be limited to some 5% of the stock market value of banks across the eurozone with French banks and investment banks being hit hardest. Credit Agricole would be worst effected by a Greek exit. The Credit Suisse analysts insist they are not expecting the euro area to break up – or for Greece to leave – but they believe it is likely there will be a dramatic reduction in cross-border business – leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a eurozone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research. –Guardian

10 Responses to Eurozone critical mass: How it could all go down this summer with Italy and Finland exiting and banks in flames

Ok, we need to watch this carefully, my point being, five countries may leave, leaving how many?
These are the weakest nations? Then a reconfiguration of nations, may save Euro?
Also, Europe may, may eventually change from oil imports from Russia as the major provider to Israel who has in the past week or so, discovered another vast field(s) of gas and oil off the coast of Hafia that is reported to exceed the previous off shore find last year.
Interesting……….

Let’s hear it for the eminently solvent, in fact filthy rich small nations of Europe, Luxembourg and Leichtenstein. I read that the Grand Duke of Luxembourg is a billionaire, and the family is skilled in finance, but conservative. The heir will marry this September (if there is a September, but more likely to be one there than elsewhere). Same deal in even smaller Leichtenstein, the Mouse that Roared. Very rich, conservative, prospering mightily with industry after centuries of rural poverty before the the “Grand Dukes” moved in and turned things around. These little nations have the highest standard of living in Europe for all of their residents. Speaks well for small enlightened monarchies (or properly speaking, Grand Duchies).

You never hear this type of news in the main media’s. You might think life is business as usual when you read the mainstrain news of today. The headlines of today’s news is what the politicians or the Hollywood stars are doing or not doing. Same old mundane subjects over and over. There is so much happening on our planet and yet it goes unnoticed by the majority of folks. So sad. So sad.

Colleen – I think part of the general apathy of Americans, is due to “news saturation”.
Folks getting bombarded with sound and video bites, who have learned to develop the attention span of a housefly.
The problem with this “news fatigue”, is that IF something REALLY serious seems about to happen….. They seem strangely ‘blase’ and ‘passe’ about these things.

ANOTHER reason, for some of the general ‘apathy’, is the commentary & chatter in the media about the economy and corporations with their ‘projected’ and ‘expected’ earnings.
HOW do they “plan” for an economy going Off The Cliff ??
Corporations, with a Head made up of a Board of Directors, being the animals of profit that they are, can’t possibly THINK or PLAN, in terms of LOSS.
It seem unnatural for them to admit to it….. The sky will be blue forever, there must never be storms or blizzards! 😐

A bag a cheetos will cure your depression and take your mind of all your economic woes. REALLY! IT’S TRUE!! I just heard about it on a radio commercial. I can’t wait for the supermarket to open so I can stock up today…

All this is happening to get it all ready for the New World Order. It is all going according to their plan. It will all lead to the take ove, and bringing in of the Anti-Christ. Just as the Bible foretells!!!! Get ready, be prepared spiritually!! It is going to happen!! Trust in the Lord Jesus Christ, he is our only hope!!!!!